Should the Law Society Limit Contingency Fees in Ontario?

A committee report finds many lawyers and paralegals are not following the current rules in place for contingency fees.

What’s best for lawyers and paralegals isn’t always best for the people they serve.

The Law Society of Upper Canada regulates the legal professions in Ontario in the public interest. It’s part of its mandate to ensure the public gets a fair shake when it comes with dealing with lawyers and paralegals. That’s why legal professionals can’t just do what they want – they have to follow the Rules of Professional Conduct and the Paralegal Rules of Conduct respectively.

Recently, the Law Society changed the rules for referral fees and advertising. Now, it’s tackling contingency fees.

What’s a Contingency Fee?

Lawyers and paralegals can structure their fees in a few different ways. Most often, they charge a running hourly rate for their services. Sometimes, they charge a fixed or block fee to perform a certain task. They can also charge contingency fees.

In a contingency arrangement, the fee is based in whole or part on the amount of money the client wins in the case. In other words, if the representative doesn’t win the case, the client doesn’t pay.

The idea of a contingency fee is that it gives clients who can’t afford hourly or fixed fees a change to get legal representation. The lawyer or paralegal takes on the case knowing there’s a chance they won’t get paid at the end.

Contingency fees aren’t allowed in criminal or quasi-criminal (provincial offences, like by-laws) cases, since that would jeopardize the representative’s loyal to the client and the rules of conduct. But just about every other area of law involves contingency arrangements some of the time. It’s especially common in personal injury cases with the potential for a big payout at the end.

Why Limit Contingency Fees?

Recently, the Law Society formed a committee to study issues in advertising and fee arrangements for lawyers and paralegals. It just released its interim report on contingency fees, which found significant issues in the matter.

According to the report, many licensees are failing to follow the current rules on contingency fees. Contingency fees are supposed to be fair, reasonable, and confirmed in writing. People aren’t doing that.

As a result, the committee finds, change is necessary to protect clients.

The committee recommends requiring a mandatory standard form agreement to make sure the client understands how the fee works before they agree to it. It also suggests additional safeguards, such as hard limits on fees (either a percentage of the settlement or the amount), requiring the client get independent legal advice before paying the fee, and new reporting requirements.

Reaction to the Recommendations

Changing the rules of conduct always creates some debate in the legal community, and this is no exception. It’s especially contentious among personal injury lawyers, whose practices often run on contingency fees.

Andrew Spurgeon, a personal injury lawyer who sits on the committee, supports the changes. He says the goal is to come up with an approach that protects the public by ensuring fees are reasonable and transparent. “The present system is archaic and needlessly complicated. It’s very difficult to explain how it works to a client. So the first thing we have to do is simplify it.”

Claire Wilkinson, head of the Ontario Trial Lawyers Association, disagrees. “Well intentioned as it may be, imposing an arbitrary cap could prove counter-productive, against the public interest and subvert the benefit of the access to justice that could otherwise be provided to many people.”

Another personal injury lawyer, Steve Rastin, echoes what Wilkinson says. “I don’t think there is ever going to be a problem getting lawyers to take on a large case. I think that a cap may function as a disincentive in smaller cases as an access to justice issue to get people to take them on.”

At this point, a cap on contingency fees won’t happen without a fight. Liberal MPP Mike Colle unsuccessfully tried to go around the Law Society and introduce a 15% cap in a private member’s bill last spring. However, I think the standardized contingency form is likely to pass, if only to force lawyers and paralegals to comply with the rules already in place.

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